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The Emergence of Social Bonds as the new trend due to COVID-19

March 23, 2021
By CSE
The Emergence of Social Bonds as the new trend due to COVID-19

From CSE Consulting team

 

Due to COVID-19 pandemic, there seems to be a growing interest from investors in sustainable finance and especially in social considerations. Economy disruption, unemployment and strained health care systems have increased the importance of social risks that could challenge future investments.

 

According to the International Capital Market Association (ICMA), social bonds fund new and existing projects with positive social outcomes, such as improving food security and access to education, health care and financing. They have emerged as a tool to address the demands of consumers and communities.
Market focus on pandemic response efforts has driven social bond issuance to new records with European Union becoming one of the largest issuers ($17 billion). French government follows the lead with $16.9 billion.

 

Generally, during the first two months of 2021, social bond issuance reached more than $50 billion. Throughout 2020, the total social bond issuance reached $148 billion. This means that over 30% of 2020’s total issuance was reached in only two months. Governments tend to be the most active issuers, accounting for 80% of the total.

 

So far, green bonds have been more popular than social bonds. However, this trend is changing and a new issue is emerging, the “social washing”. The social bonds standards are more complicated, because the social impact assessment is more qualitative, confusing the investors.

 

What can be defined as “social” and how can the risk be mitigated?

 

CSE is a leading ESG Consulting firm with sector-based integrated consulting services on Sustainability (ESG) from ESG Reporting and Ratings, Certification & External Assurance, to Impact Assessment and Strategic Planning. For more than 14 years, CSE helps FORTUNE 500 and other organizations around the globe improve their ESG Ratings and maximize their social, economic and environmental impact.

To guide you securely into building or optimizing your Sustainability (ESG) strategy, CSE can provide coaching and practical tools.

 

Contact us for more information or a free ESG Ratings Assessment.

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